Tuesday Morning

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Market Sentiment Watch: Market still seems tired ... it rallied in tired fashion yesterday, dribbling up after a better than expected home builder's number gave it permission. Today, a number of Dow components are out with 3Q results and bottom line beats are being juxtaposed with mostly cautious outlooks.  In energy land today we have the second half of the Bakken Update piece with some company specific thoughts, earnings wrap comments from HAL and MMR which both ended the day yesterday off sharply, and earnings coal player BTU and service provider WFT. 

Ecodata Watch:

  • Housing Starts came in at 610,000 vs 578,000 expected, best level since April. This may get "grain of salted" however with the new foreclosure issues taking precedence. If you can't clear the housing inventory, why build more houses? 

In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Crack Spread Update
  4. Stuff We Care About Today – BTU, WFT
  5. Odds & Ends

Holdings Watch:

  • ZCAT (Zman Catalyst portfolio):
    • $5,200
    • 100% Cash
    • Yesterday’s Trades:
      • None
  • ZIM (Zman Inefficient Markets portfolio)
    • $4,100
    • 12% Cash
    • Yesterday’s Trades:
      • HAL – Added (20) HAL November $36 calls for $0.71 with the stock opening down pretty hard on a good quarter which missed the "whisper" number. Conference call ongoing, see site for details so far. 
      • MMR - Added (20) MMR November $17 calls for $0.82 with the stock at 16.14. 
      • MMR – Added 4 more on a partial fill at $0.70 on MMR $17 November Calls.
  • ZLT (Zman Long Term portfolio)
    • Added MMR for $17.77. As usual with the ZLT, thinking long term and starting small. If we see further near term weakness I may forgo my customary 2 to 6 week wait time and go ahead and add a second tranche as we have potential catalysts between the end of October and year end. 

Commodity Watch

Crude oil rallied $1.83 to close at $83.08 yesterday, a one week high. A strong equity market, a weaker dollar and a refinery strike in France (which could eventually cause few exports from Europe as finished products are diverted) all contributed to the rise.  This morning crude is trading off a buck with equity futures.

  • Early Read on Oil Inventories:
    • Crude: UP 1.5  mm barrels
    • Gasoline: DOWN 1.4 mm barrels
    • Distillates: DOWN 1.0 mm barrels

Natural gas fell a dime yesterday to close at $3.43 yesterday ...mild weather continues to allow storage to rise at higher than normal rates late in the season. This morning gas is trading up 3 pennies. 

  • Early Early Read on Natural Gas Storage: The Street is looking for an 84 Bcf injection this Thursday. This is again well above the 5 year average for this week of the year. 
  • Tropics Watch: Mostly quiet.

Stuff We Care About Today

BTU Reports Strong 3Q10 Results

The 3Q10 Numbers:

  • Revenue of $1.9 B vs $1.86 B expected
  • EBITDA was $571 mm for the quarter ($293 mm US / $323 mm Australia ... both regions saw higher margins)
  • EPS of $0.99 vs $0.91 expected


  • Guidance:
    • 2010: Raising midpoint of EBITDA and EPS targets
    • 2010: Volumes seen same as last update at 240 to 260 mm tons 
  • Quotes from management: 
    • Peabody believes that the global coal industry is in the early stages of a long term supercycle, led by China and India
    • Year-to-date demand for seaborne metallurgical and thermal coal products is very strong in the Pacific, averaging 15 percent above prior-year levels due to increased needs of China, India and other Asian nations that continue to recover from the recession.
  • Macro Watch:

    • China coal fired generation up 19% ytd, China steel production is up 15% ytd.
    • India coal imports up 36% ytd 
    • Coking coal prices continue to run in the $200 to $225 per ton range, very strong
    • Australian thermal coal prices are running 35 to 40% ahead of year ago levels. 
    • They see global seaborne met coal at a record 270 mm tons, 35% higher than 2009 levels. This may make me get back into WLT and look at ANR.   WLT has a production hiccup that may hurt the quarter though and ANR I only am familiar with in passing so it may be that I play BTU or wait out the WLT quarter and a potential dip before re-entering. 
    • Seaborne thermal coal remains strong as well, also setting a record in the Pacific as it surpasses 500 mm tons, up 15% from year ago levels. Not a lot of progress being made on the whole global climate warming change thing here. 
    • US inventories continuing to drop at faster than normal rates, double normal during the 3Q... combination of higher U.S. demand for generation this year and the mine shut downs of the last couple of years. 

Nutshell: For the most part I'm watching for any signs of weakness in the global coal market outlook, both on the the metcoal and the steam coal sides of the market.  

Conference Call: Today, 11 am EST

WFT Reports In Line 3Q10 Results

The 3Q10 Numbers:

  • Revenue of $2.534 B vs $2.62 B expected (up 18% YoY, up 4% sequentially)
    • same story yesterday as HAL with North America and Russia strong, Latin America weak 
  • EPS of $0.18 vs $0.17 expected (double year ago levels)


  •  "Sequential earnings growth the last three quarters lead the company to believe that the fourth quarter and 2011 will continue to show additional improvement.  A return to improved market conditions in Mexico and the Middle East coupled with continued strength in North America, South America and Russia should drive improved results through 2011."
  • I'd be cautious about the "continued strength" comment as it relates to North American land going into 2011. We should a contraction in the rig count next year in NAM which can depress both price and volumes. 

Conference Call: Today, 9 am EST

Other Stuff

  • Energy Earnings Tomorrow: CLB, ECA, NE
  • NFX reports on Thursday and I would expect an @NFX update on operations between tonight and then.
  • Bakken Updated Part 2 will be out tomorrow. 
  • SSN advises that its next Bakken well has reach TD, saw shows along the way, and was drilled with a 5700' lateral. 
  • APC with big gas find (416 net feet of pay) off Mozambique in at least 3 sands, this is the second big find for APC and partners off Mozambique (east Africa) following on the heals of a string of successes off western Africa. 

Odds & Ends

Analyst Watch:

  • OAS - Cut to Market Perform at Wells Fargo on valuation, second cut in 2 days
  • PXP - Cut to Market Perform at FBR, also on valuation
  • HAL - Barclays raises price target by $5 to $47, rating stays Overweight
  • HAL - FBR raised its target by $6 to $40, rating kept at Market Perform

186 Responses to “Tuesday Morning”

  1. 1
    snuhart Says:

    Seeking Alpha  has  full coverage of MMR
    presentation including Q + A

  2. 2
    jat Says:

    Yeah, so WFT beat and raise.  But it's the typical WFT beat, with a lot of hems and haws and excluded bs like a 54mln charge in (you guessed it, Z) Mexico for poor accounting estimates.
    NAM was huge with Canada but everything else sucked.  Guidance above consensus for 2011.  What a trustworthy mgmt team. 

  3. 3
    jat Says:

    What is funny is that the trade of the day yesterday was to dump HAL for missing a whisper even though they repeated a solid, quality beat to consensus with 2011 estimates to rise.
    And then to chase WFT, more expensive on P/E, which has given you a pretty clear Q3 miss, evidence that they overstated Mexican profits in the past, and 2011 guidance that I'm sure will be reduced at some point. 

  4. 4
    bill Says:

    for cargocult
    exm q2 earnings release
    Things are looking better, debt being paid down, covenants being met. exm has spot exposure, good if rates move up
    Dry bulk market q2 was relatively good, q3 will be weaker than q2, and q4 looks better than q3 as capes come back. The Panamax segement is weaker than the first half of the year.
    This is a good site to watch rates. May i refer you to panamax rates the blue line on the chart, they are weak and exm has a bunch of panamax's
    There is concern that the market is oversupplied with new deliveries.
    So i prefer less risk and lean toward dsx at the moment. Id warm up to exm if panamax rates were to improve. the risks are probably built into exm so i dont see i big downside move either

  5. 5
    zman Says:

    re 3, yeah, exactly, that's irony for ya.  I liked the Morgan estimate hike and rating downgrade. 

  6. 6
    bill Says:

    ng ep stocks are up pre market..what gives

  7. 7
    zman Says:

    WFT Notes

    Listening to WFT, also more for the macro than for the company specific although it's going to open off sharply.

    Mexico sounds awful from a getting oil wells drilled standpoint. He called it a fundamental change from a policy standpoint. Pemex has been talking up their plans but of late, they are not doing much of anything and it is widespread. If this keeps up I will accelerate my thinking here that withing 5 years they will be a net importer vs their large oil exporter status now. They  are already slipping in the rankings of crude going to the US.  That's a big plus for crude prices. 

  8. 8
    zman Says:

    re 6 – volumes are smallish, probably just noise. Gas is up slightly. If you look at the range we are just below the low end of the range so it's possible people are simply expecting a good sized dead cat bounce. 

  9. 9
    zman Says:

    editor off

  10. 10
    zman Says:

    FBR on HAL, as they raised their target (see bottom of post) saying they see NAM as a growing headwind (that’s a common theme on the coming drilling decline and increases in frac capacity) and that the international side will gain traction to offset.

    WFT – saying that in the Easter Hemisphere, all countries are seeing increased activities.

  11. 11
    bill Says:

    On Sandridge, Ward file a 13 d yesterday.
    He get stock grants twice a year, looks like 5 m- 6 m per qtr.. since sd stock price was down to 4 in july they issued 1.3 m shares in july.
    Imagine that, trash your stock, and the BOD gives you MORE shares. It's even worse when you realize 1.3 m shares is 3 % of the outstanding stock. So shareholders are being diluted 5 % a year just on Ward compensation package. And the lower the price goes the more shares he gets
    Oh, ward is chairman of the BOD. This is pure theft imho

  12. 12
    zman Says:

    Analyst Watch

    NFX – RBC initiates with Outperform rating and $78 target.

  13. 13
    zman Says:

    re 11. Ya know, I have to agree.

  14. 14
    ram Says:

    I wonder if IBM sneezed, if the whole market is going to get sick for a while?

  15. 15
    john11 Says:

    Any broker comments anywhere re MMR?

  16. 16
    zman Says:

    re 15 – great question, have not seen anything yet? Bueller? Bueller?

    Another day another broker who doesn’t get it on OAS. Or simply wants to gen some commish.

    re 14 – yeah and AAPL was pretty cautious.

    Ugly open on tap, may look a lot different after the initial punts though on the OK eco numbers today and BAC trying to get back to foreclosures.

  17. 17
    zman Says:

    Analyst Watch:

    HAL – Stephens – We are maintaining our
    Overweight rating on HAL and increasing our price target from $40/sh
    to $45/sh.

  18. 18
    zman Says:

    CLB off $5.50 with earnings tomorrow and no news today.

  19. 19
    zman Says:

    Nicky’s target support level to watch was 1163, we’re now down 14 at 1170.

  20. 20
    BirdsofpreyRcool Says:

    Strange… or, better yet, strangely quiet on the MMR analyst comment front. Have my lookouts ready to send over any Joe Allman comments that hit the street. So far, radio silence.

    TED just as calm as ever. Market give-back day, it seems.

  21. 21
    zman Says:

    BOP – has your petro engineer analyst buddy commented on MMR yet?

  22. 22
    blackgold39 Says:

    MMR taking a beating

  23. 23
    bill Says:

    memo to self

    sell every rally

  24. 24
    BirdsofpreyRcool Says:

    #21 — no peeps from the Peeps, that i can see. Duane, you out there guy??

  25. 25
    zman Says:

    TAT – getting a bit of a bounce from the recent, rapid, unprovoked (unless they had insider knowledge) sell off or were in the friends-of-management-with-deep-pockets-who bought-the-shares-post-deal-to-prop-the- stock group.

  26. 26
    zman Says:

    re 22 – yeah, I think it’s a) market and b) to be expected after a bad day yesterday on a market day like today. I’m not overly concerned on the options just yet and not at all on the stock purchase. I am teeing up to buy more common in the ZLT sooner than I normally would. The concerns that drove the break in the stock yesterday (water in some zones) don’t necessarily mean what the market thinks they mean. Jim Bob didn’t mean to imply it but also, he would not have said it if he’d have thought people would run with it in this way.

  27. 27
    BirdsofpreyRcool Says:

    MMR maybe afloat on a restless sea without a rudder for the next two weeks. Until they have some results to talk about from Blueberry Hill. Two weeks seems like forever, in Market Dog Years. But, we’ll get there. And the weaker hands will have left the party.

  28. 28
    zman Says:

    I’ll have a revised Catalyst List out in the next few days with headsups for the quarterly news of impact highlighted.

  29. 29
    zman Says:

    re 1 – do you have a link to that? I searched SA and don’t see the transcript yet?

  30. 30
    cargocult Says:

    Bill-thank you very much for the EXM slides, above and beyond the call of duty. And I agree with you on the SD ceo compensation. I thought ceo’s were supposed to earn their keep. After awhile he’ll have so much stock his compensation will just be diluting his own position.

  31. 31
    bill Says:

    dsx down 1.7 % on good news, leased a ship for 2 years

    nm down 1.3 %

    exm down 1.0 %

    This is another risk in investing in bulkers, ie. the overall market

  32. 32
    redjack Says:

    z…mmr transcript

  33. 33
    zman Says:

    re 31. Yeah, actually a lot of names down on good news / strong results. BTU had a great quarter and could really not have been expected to say better things (see macro comments in the post), yet down and WLT, who would be set to benefit from those same items, is getting hit hard. After the runs in the S&P in September and up to now in October it looks just like market digestion / indigestion. So far all energy reporters are down despite beats except for MMR which was a special case but nonetheless down sharply. Some quarters, where you see down stocks on the early reports follow through for the rest of the quarter in that manner … self fulfilling prophecy, especially if the market provides no or waning support.

  34. 34
    zman Says:

    Thanks RJ!

  35. 35
    bill Says:

    I dont mind what a ceo makes , if he deserves it.

    Diluting shareholders after the company stock is down 90 % is an insult. He should not get any grants until the stock gets to 15.

    There is no checks and balance, he can do whatever he wants

  36. 36
    zman Says:

    re 35. And the fact of the matter is, he should voluntarily suspend any deal like this that was instituted during better times. To pile on now and dilute the remaining faithful is a negative character point in my book.

  37. 37
    zman Says:

    CLB down $1.60 now, that was quick.

  38. 38
    zman Says:

    Mexico – over half of their reservoirs are shut down now. Past years Mexico overspent. Now they have had to cut operations to work through the budgetary short fall. WFT sees a ramp back up next year, but not sure how fast.

  39. 39
    zman Says:

    HAL basing at support, JB, any thoughts there? Just wondering on the options side. I am looking to add common in the ZLT.

  40. 40
    zman Says:

    WFT call over, nothing changing my thinking on 2011 being the year international growth starts to really move. Asia, Russia Middle East all expected to ramp. Special situations are Mexico to recover and Iraq to really get rolling, probably late in the year.

  41. 41
    BirdsofpreyRcool Says:

    Capital One Southcoast = first comment i’ve seen on MMR. $22 PT. And… (didn’t think i was making this up, but good to see someone else heard it)

    What to watch: We expect the Blueberry Hill flow test in the next 2 – 3 weeks followed by final Blackbeard East well results by the end of November and Davy Jones appraisal well results by December.

  42. 42
    zman Says:

    BTU back to slight green, call in 1 hour.

  43. 43
    BirdsofpreyRcool Says:

    Capital One Southcoast… sorry, no PT given, $23 NAV breaks down like this

    Valuation breakout: Our $23 NAV is based on $2 for base production, $2 for Flatrock, $6 for Davy Jones, $3 for Blackbeard (West & East), $10 for the other ultra-deep prospects, and $1 for Blueberry Hill, less $1 for net debt (including the $900MM raised last month).

  44. 44
    BirdsofpreyRcool Says:

    THAT is why i love EXXI (but only like MMR)… only $2 of MMR’s NAV is based on current production… the rest is upside due to — albeit extremely large — Ultra-Deep prospects in the future.

    EXXI… their current production supports $15-19+ of NAV, imho. So, much more of a (oily!) production floor to backstop the current stock price.

  45. 45
    zman Says:

    Thanks BOP

    I know that in some deep shelf wells, in the 16,000 foot range, you have water in zones that are productive. Pressure depletion drive vs water drive. In the pressure depletion drive, the water level doesn’t move as the pressure of the reservoir forces gas to the well bore. In a water depletion drive, you have the water replacing the hydrocarbons as they are produced until such time as the well “waters out”.

  46. 46
    zman Says:

    Oil down $2.20. French toast.

  47. 47
    BirdsofpreyRcool Says:

    Will stick my little fluffy paw out for more EXXI at 22.50 today. MMR is cheap too.

  48. 48
    zman Says:


    SSN – Added more shares at $1.17

    MMR – Added more shares for 15.78

  49. 49
    zman Says:

    EXXI going slight shade of green.
    MMR off the lows nicely. Have to think they are getting the word out to a bunch of inquiring minds that Joe A’s assumptions are all wet.

  50. 50
    BirdsofpreyRcool Says:

    Joe A’s comments were like Christmas in October. He gave us a gift.

  51. 51
    zman Says:

    re 50. Stock holders yes. Option holders no, he’s a putz.

  52. 52
    zman Says:

    Glad to see BTU rally here. I don’t own it but I like to think the market is still in the habit of rewarding good quarters and strong outlooks.

  53. 53
    BirdsofpreyRcool Says:

    Funny how it’s just human nature to want to buy MMR at $19, but be afraid to bend over and pick it up at $16. Everyone talks about how you make money as a “contrarian”… but it is honestly a tough thing to do. In the end, we are still herd animals, it seems. No shame in that… just recognizing the fact.

  54. 54
    zman Says:

    If they can trip it into the green it could be big rally time.

  55. 55
    BirdsofpreyRcool Says:

    OT: TomDavis, you ever do anything with IVR?

  56. 56
    Dman Says:

    Z – re Mexico. I see what you mean about Mexico ceasing to be an exporter. But I don’t know about becoming an importer, I mean what are they going to buy it with?

    Oh right, drug money.

    Point I’m making is that ceasing exports (or just letting them fall) is going to cause mayhem down there … and it won’t stop at the border.

  57. 57
    zman Says:

    Bill – where is Robry fro Thursday? We are piling up too much gas late in the season due to all this mild weather.

  58. 58
    Dman Says:

    BOP – I’m thinking most critters possessing “fluffy white paws” probably ain’t of the herding variety 🙂

  59. 59
    zman Says:

    Dman –

    I think it is the biggest source of revenue for them. And they are also a top 5 importer to the US. And they also have one of the fastest growing populations of compact cars so domestic demand is on the rise.

  60. 60
    blackgold39 Says:

    MMR really running now, what happened?

  61. 61
    zman Says:

    re 60. End of panic, beginning of reason.

  62. 62
    BirdsofpreyRcool Says:

    #58 — Dman… that made me ponder for a second… then smile. You don’t miss much, do you.

  63. 63
    blackgold39 Says:

    Jajaja, glad I wasn’t scared loading up in those options late yesterday

  64. 64
    zman Says:

    re 58. I’d say sheeple but A) she’s not one and B) I’d guess their paws are matted and dingy.

  65. 65
    snuhart Says:

    Z-reading 40. Is it correct to conclude you re favorably disposed to WFT ?

  66. 66
    zman Says:

    BTU call in 15 minutes.

    BG – I probably should have said end of fear and now free to trend with the S&P.

  67. 67
    BirdsofpreyRcool Says:

    z — it’s like we here are Market Predators, but you provide the leadership so that we can hunt in packs. It works much better that way. Thank you.

  68. 68
    zman Says:

    re 65. I’m much more favorably disposed to HAL at this point. WFT surprised me with a sunny outlook last quarter. The stock even performed well for a bit there. This quarter they turned in OK results but they did not, across the board, grow as fast as they thought they would. So if they recover at a big % clip than say HAL or SLB it is more of a function of them recovering from a bigger hit (smaller starting number). I simply don’t have much faith in their ability to read the forward tea levels as well as the other too. If it gets really crunked next few days I may take a look but honestly, I’d rather just be long HAL.

  69. 69
    zman Says:

    WLL off 2.5% with oil. Another day like that and I’ll take options for the 3Q results.

  70. 70
    BirdsofpreyRcool Says:

    Since much of the recent market anxiety has come from the Mortgage Mess Area, it’s telling to watch BAC.

    And to remember that during all this, TED didn’t budge an inch.

    Probably not all over yet… but in the end, will prove to be sound and fury… signifying little.

  71. 71
    zman Says:

    No leadership, just telling you what I’m doing, right or wrong. 😉

  72. 72
    ram Says:

    HAL seems to have a prolonged hangover.

  73. 73
    zman Says:


    I hear some congressman or senator is upset with BAC, saying they could not have gone through the hundreds of thousands of foreclosures in process to restart the process by the 25th.

    BAC responded by saying, yes it could, it hasn’t rushed the process and oh by the way, 200,000 of those mortgages have not made a payment in over 24 months. Unreal to think they would be able to avoid foreclosure anyway. Sheesh, ugh, double ugh. I you don’t clear the foreclosure log jam, it will be difficult to sell new and old homes, to originate loans, to get the economy rolling. Or you could just punt the whole thing from the federal level and despite the fact that the new finreg set up a committee to deal with things like this, down to the states, who will grandstand as the AGs try to make big names for themselves.

  74. 74
    Dman Says:

    BOP – well oops, I just saw that you only said “little fluffy paw” and my mind must have added the detail of it being “white”.

    Or as Tweety would say, “I tawt I taw a puddy tat!”

  75. 75
    zman Says:

    re 72. I think it will recover in the near term. The outlook is pretty solid.

    If you look at the long term thought here, that the unconventional resource in the international realm is multiple times the size of the US and that the equipment devoted to that is infinitesimally smaller than that of the U.S. at present, then you have a big part of my thinking on why I want to own the stock itself. I just wish they paid a dividend that I could like as well.

  76. 76
    BossmanG Says:

    z, re:57, who is robry?

  77. 77
    BirdsofpreyRcool Says:

    Dman — “little white paw” added an air of delicacy and femininity. Didn’t mind in the least. Like white gloves and cups of tea… a charming mental image. 🙂

  78. 78
    zman Says:

    re 76. He’s a guy who’s been around a long time in the gas market, putting forth good week estimates of injections and withdrawals via a statistical model that I believe is centered on pipeline flows. He also puts out some other data, including production data that I find to be overzealous.

  79. 79
    zman Says:

    Analyst Watch

    HAL – just out at least on my screen, Raymond James raises target from $39 to $45.

  80. 80
    BirdsofpreyRcool Says:

    Read that the NYT marched out it’s Front Page Mortage Foreclosure Victim to support the “It’s Just So UNfair” campaign. Turns out, the woman was 24 months behind on her mortgage. WSJ op editor wondered out loud if the NYT would continue to deliver its paper to a customer who hadn’t paid their subscription in 2 yrs.

    Apples and oranges, i know… but, puts a lot in context, i think.

  81. 81
    zman Says:

    Good coal macro overview about to start here:

  82. 82
    BossmanG Says:

    Is robry independent? or with a firm? thanks!

  83. 83
    zman Says:

    WHX still trying to break out, despite the market.

  84. 84
    zman Says:

    Boss – not sure, bill puts a link to his stuff which is available in some chat room on the site occasionally. Robry has historically been accurate at predicting the week to week numbers.

  85. 85
    snuhart Says:

    Z re 68 Thanx

    Bop it’s not apples and oranges (80)

  86. 86
    zman Says:


    China will add 290 GW of coal fired power online between 2011 to 2015. That’s 1 billion tons of new coal per year.

    China says it will be in “development mode” for the next 30 to 40 years.

    3.6 billion people still lack adequate access to electricity.


  87. 87
    zman Says:

    BTU Notes

    September steel coal imports were 13 to 14 mm tons, that’s up from the current run rate of 130 mm tons for the year.

    Coal prices rallied in the 3rd quarter despite comments that it would stop earlier this year.

    In the US, we saw the biggest reduction in US stock prices this past summer.

    BTU expects the recovery to be more pronounced in 2012, more muted in 2011.

    Return to normal weather patterns expected, and have contracted 90% of their thermal coal for 2011 as such.

  88. 88
    zman Says:

    Sidenote: MMR keep trying to fight green, been there a couple of times, tick for tick now with the current level of the S&P.

    KWK – at $15, haven’t seen much more on that situation from the Street, anyone?

  89. 89
    zman Says:


    PRB coal close to $15/ton now, that was about $10 at the beginning of the year. This is the low SO2 but also low BTU Wyoming coal. Big time demand to blend with dirtier but higher heat value Appalachian coals. That coal is only going to be in higher demand as time passes with the current EPA in charge. BTU is the big name there too. This probably isn’t a driver for the stock at all near term, but over time, I could see prices going quite a bit higher for this type of coal.

  90. 90
    zman Says:


    China comment. They saw 3Q in China as a slower quarter for the Chinese as China was attempting to meet some emissions targets as part of a five year plan. Now they see those as met and they are going to come “roaring back” in the energy intensive industries, especially since they’ve seen an early start to winter in China. Sounds like we are going to see some even stronger Chinese ecodata and demand when the October numbers come out.

  91. 91
    zman Says:

    Tiny CXPO trying to break up through $3 on a mostly red day. Catalysts on the way here including Eagle Ford

    Crysball – I’ll be adding that SDM section you requested, including CXPO, sometime next week.

  92. 92
    zman Says:

    … and on CXPO, probably better than originally anticipated 3Q and 4Q reports.

  93. 93
    Dman Says:

    BOP, I’d be happy to accept delivery of the NYT, as long as they compensated me adequately for the loss of my quality of life.

    Oh wait … they want *me* to pay *them* ??!!

  94. 94
    tomdavis12 Says:

    BOP 55 I am much more comfortable with Farrell @ NLY than IVR. Have not looked at for awhile. Are you doing any work with IVR?

  95. 95
    zman Says:

    Elduque, just saw your email, will look at after this call.

  96. 96
    choices Says:

    Noticed DX getting a fairly strong dead cat bounce, Euro off,
    gold,oil off, prob related.

  97. 97
    zman Says:

    BTU call still ongoing.

    Can be summed up as demand continues to rise, prices firm to rising, costs falling.

  98. 98
    zman Says:

    re 96. Absolutely related. The French are still striking as a screen shot from Paris on CNBC shows a bunch of people not working.

  99. 99
    RMD Says:

    GHS points out some underwhelming Niobrara results from VYOG yesterday.

  100. 100
    tomdavis12 Says:

    Z: 88 Anecdotal KWK bonds down = greater probability of going private than corporate raid. OT What is your overall take about the ability of the coal industry being able to increase supply. We have been through NG and that hasn’t been pretty.

  101. 101
    Geno Says:

    Re 98 “not working” sounds like a regular day over there

  102. 102
    zman Says:

    RMD – had not seen, thanks, one geosteer issue that landed them mostly out of the zone on the lateral, one lousy IP of 20 bopd, and one not yet completed that is worth watching. Note also participation in some nice Bakken completions for small WI%’s. Glad that Weld County, CO is a long way, relatively, from Goshen County, WY.

  103. 103
    zman Says:

    re 101. I hate to lump them all in without adding an LOL but those protestors are protesting a longer working career. Wondering how big the job sharing thing is over there.

    SSN trying to bottom but on lite volume so far.

  104. 104
    blackgold39 Says:

    What does the fundamental valuation of MMR look like right about now?

  105. 105
    zman Says:

    re 104. It’s almost all on the horizon. Multiple TCF of “possible reserves”. They’ve be high on a proved reserve basis or a near term P/Fwd CF ratio. If the ultra deep works they are cheap, cheap. 3 net wells (on one of their projects) in the large liner size would equate to their current production and their reserves would be multiples of the current proved.

  106. 106
    zman Says:

    BTU back to flat on the day following the call. I didn’t hear anything that I’d call a trigger for that, it was more of an erosional move. I’m not going to play there today.

  107. 107
    zman Says:

    S&P has more than cut its losses in half. Down 7 at 1177, Nicky says she will be on shortly.

  108. 108
    zman Says:

    OAS starting to fight off the 2nd downgrade in as many days. Grabbing lunch, back in 30 min.

  109. 109
    zman Says:

    WLL – Jefferies surmising that WLL added more acreage in the Lewis and Clark area, we’ll know for sure by 3Q, probably along with 3 or 4 more wells there, across the mid section of the play and one twinning one of their strong wells in the play with a longer lateral this time.

  110. 110
    choices Says:

    Shots fired at Pentagon, hit building, Pentagon in lock down.

  111. 111
    zman Says:

    Bakkens all weak across the board, save NOG which was weak yesterday. Market appears to be marking time today, volatility falling off into the afternoon. Doing some reading, will be around if needed, just shout out.

  112. 112
    bill Says:

    Vale (VALE5.SA) will take delivery of the first of 36 Chinamax ore carriers in June 2011 which will carry ore between Brazil and China. The order includes very large crude carrier oil tankers which are being converted to carry ore. Ian Shirreff, Shanghai-based chief executive of Zodiac, which has contracts to bring iron ore to 20 of China’s biggest state steel mills, said the development will “have the biggest effect on the market that we’ve seen in 30 years.”

    “They’re planning 80-100 vessels to drive the market down so low that the differential between Brazil-China freight and Australia-China is minimal,” Shirreff told the Coaltrans annual coal conference in Amsterdam on Tuesday.

    “Make no mistake, this will happen,” he added.

    Shirreff said the giant bulk carrier will force rates down, adding that he estimated freight rates would return to the $10,000 to $12,000 a day time charter rate seen in 1977 within the next 5-10 years.

    Average earnings for capesize vessels, typically hauling 150,000-tonne cargoes such as iron ore and coal, reached $45,666 a day on Tuesday, Baltic Exchange data showed.

  113. 113
    zman Says:

    re 112. Wow, thanks.

  114. 114
    bill Says:


    robry is at +82

    he is a guru that tracks pipeline flows and estimates supply demand,injections

    he posts here daily


    y-o-y deficit at only + 20

    so injections have been coming on strong in the shoulder season and the progress made this summer (due to hot weather) has been wiped out

  115. 115
    john11 Says:

    Anybody see anything on MHR, its quite strong.

  116. 116
    zman Says:

    Thanks bill.

    John – I don’t see anything, could be some news leaking out on their first EFS completion, could be out any time.

  117. 117
    zman Says:

    WLL off $4/4% now, just drifting.

  118. 118
    RMD Says:

    GHS upgrade WTi to neutral.
    downgrade CHK, CLR, CXPO ROSE, RRC, SWN, TAT, EPM from buy to accumulate.

  119. 119
    BirdsofpreyRcool Says:

    BAC — dragging the mrkt down by the scruff it it’s neck…. PIMCO and NY Fed seeking BAC to repurchase martgages… shares drop.

  120. 120
    BirdsofpreyRcool Says:

    Anyone here own AREX? I don’t… but looks like people loved their analyst day y’day. That said, wanna bet AREX does a 2ndary before now and end of the year?

  121. 121
    zman Says:

    S&P off a cliff on that, WLL back down through $100. Ugly in energy land and elsewhere.

    S&P off 2% now.

  122. 122
    BirdsofpreyRcool Says:

    Wonder if PIMCO bought SPX puts ahead of making their statement….

  123. 123
    BirdsofpreyRcool Says:

    Still not getting my 22.50 EXXI shares, yet tho…

  124. 124
    zman Says:

    re 120 – that’s RMD’s name, think he went to the meeting.

    Re 100. Ability to scale up to meet demand is good if a bit slow. The US industry has been in the process of shuttering mines since the slide in prices at the tail end of 2008. So those would have to be reactivated to move to higher capacity. Internationally, capacity continues to come on, especially in Australia, Brazil, and Indonesia. But demand has been outstripping this supply and you still here comments about “selling all we can produce”, especially from the smaller names like WLT on the met coal side.

  125. 125
    zman Says:


    WLL – Bought 1 WLL $100 calls for $3.90 with the stock down 5.4% at $99.40 as the market retreats.

  126. 126
    BirdsofpreyRcool Says:

    Credit Bears are pressing on BAC… trying to break the mrkt. Is 1162 the level the SPX has to hold?

  127. 127
    zman Says:

    I think she said 1163.

  128. 128
    BirdsofpreyRcool Says:

    That’s about where we are… i’ll bet we hold, then bounce. But, just guessing.

  129. 129
    BirdsofpreyRcool Says:

    RMD is a great stock picker…

  130. 130
    zman Says:

    re 128, thinking same. Also thinking Bill Gross is getting a bit manipulative for his own good. First he gets the list of “must buy bonds” direct from the fed, then he starts making announcements in conjunction with the fed. He said the other day on CNBC he had the “early word” on what the Fed was going to do next.

  131. 131
    jiveyjr Says:

    if anyone wants BSIC…open up your bag…they are filling it below $1 on my itty bitty orders

  132. 132
    zman Says:

    Will be interesting to see if WLL will mount a quick recovery here. Oil is still over $80 which is not so important, still above $70 which is sort of where I think sentiment would get worried, and well above $40 where they actually break even on the Bakken efforts.

  133. 133
    BirdsofpreyRcool Says:

    It is amazing to me that people “trust” Bill Gross. He is a snake in the grass.

    He is a very good, very RICH snake in the grass… but a predator, nonetheless.

    You know I side with predators… but only if the playing field is flat. You give a predator an inside edge and the game goes all cattywhampas for the rest of us.

    Kinda like handing too much power to a politician… but i digress…

  134. 134
    zman Says:

    Thanks for pointing it out J, it just went from 0 volume to over 7x avg daily volume. Not a lot of thought being placed in this market.

  135. 135
    zman Says:

    re 133. Yeah, timing is good too, China raised, market has been up, dollar taking a turn for strength for the first time in a bit, and it’s October.

  136. 136
    zman Says:

    KOG down 7.5%, just a bit nutty out there today.

  137. 137
    zman Says:

    Pimco on the tape saying no comment on the BAC on the mortgage repurchase story. BOP – did Gross say they should do it or they are doing it?

  138. 138
    BirdsofpreyRcool Says:

    From Bloomberg —

    Pimco, New York Fed Said to Seek BofA Repurchase of Mortgages
    2010-10-19 17:49:57.995 GMT

    By Jody Shenn
    Oct. 19 (Bloomberg) — Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.
    A bondholder group wrote to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service the loans properly, their lawyer said yesterday in a statement that didn’t name the firms.
    Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.
    “We now are in a position where we have to start a clock ticking,” Patrick, who is based in Houston, said today in a telephone interview.
    MetLife Inc., the biggest U.S. life insurer, is part of the group represented by Gibbs & Bruns, said the people, who declined to be identified because the discussions aren’t public.
    TCW Group Inc., the manager of $110 billion in assets, expects to join BlackRock, the world’s largest money manager, and Pimco, which runs the biggest bond fund, in the group, the people said.
    Countrywide also hasn’t met its contractual obligations as a servicer because it hasn’t asked for repurchases itself and is taking too long with foreclosures, either because of document or process mistakes or because it doesn’t have enough staff to evaluate borrowers for loan modifications, Patrick said. If the issues aren’t fixed within 60 days, BNY Mellon should declare Countrywide in default of its contracts, she said.

    Trustee Duties

    “The letter states a demand directed to Countrywide to cure the defaults,” said Kevin Heine, a spokesman for BNY Mellon. “It does not ask BNY Mellon to take any action. BNY Mellon will continue to perform its duties as trustee.”
    Charlotte, North Carolina-based Bank of America will “defend our shareholders” by disputing any unjustified demands it buy back defective mortgages, Chief Executive Officer Brian T. Moynihan said today.
    Most claims “don’t have the defects that people allege,”
    Moynihan said on Bloomberg Television, referring to so-called putbacks, in which guarantors or investors in mortgage-backed securities ask to return bad loans. “We end up restoring them, and they go back in the pools.”
    Mark Porterfield, a spokesman for Newport Beach, California-based Pimco, Brian Beades, a spokesman for New York- based BlackRock, and Peter Viles, a spokesman for Los Angeles- based TCW, declined to comment.
    John Calagna, a spokesman for New York-based MetLife, didn’t immediately return messages seeking comments. Jeffrey V.
    Smith, a spokesman for the New York Fed, declined immediate comment.
    “We continue to review and assess the letter, and have a number of question about its content, including whether these investors have standing to bring these claims,” Bank of America Chief Financial Officer Charles H. Noski said today on a conference call with analysts. “We continue to believe the servicer is in compliance with the servicing obligations.”

  139. 139
    zman Says:

    Thanks, just found the same on zerohedge.


    Not sure how Bill Gross can say “no comment” at this point. Zerohedge calling it the advent of Tarp II.

  140. 140
    choices Says:

    Bill Gross gaming the “system”


  141. 141
    choices Says:

    did not see 139 prior to posting 140

  142. 142
    BirdsofpreyRcool Says:

    HeadTrader says to ignore the zerohedge comments… unless you want to read (or believe) what the extreme views are. Always good to know what HT thinks.

  143. 143
    zman Says:

    BOP – I dunno, I’ve seen some interesting stuff that the market seems to care about, awfully early over there.

  144. 144
    zman Says:

    BTU – off 3% now, again, that was a solid quarter with about as good an outlook as they could have dared provide.

  145. 145
    BirdsofpreyRcool Says:

    guess he means not to “not look”…. but “not believe everything you read” over there. that’s all.

    always good to know what everybody is saying… just don’t have to believe them all.

  146. 146
    zman Says:

    Hear ya on that, was thinking more of news flow than of their interpretation which also a bit dark/extreme.

  147. 147
    BirdsofpreyRcool Says:

    Still not getting my cheap EXXI shares yet. Drat. If the mrkt wants to sell off, at least SOME good should come of it!

  148. 148
    zman Says:

    BOP – there are cheapish KOG shares to be had, especially if they easily best the official 2010 exit rate.

  149. 149
    zman Says:

    CNBC confirms NY FED, Pimco, Blackrock suing BAC.

  150. 150
    BirdsofpreyRcool Says:

    Read today’s commentary from XACS#2 (which I can no longer post)… the macro view is that he thinks with the massive improvement in the credit markets and the amount of corporate issuance (and govt support), we are looking at a market like 2004… before the big equity run. He thinks it could last until 2013, perhaps. But, it’s never straight up and to the right… mrkt need to climb a wall of worry.

  151. 151
    BirdsofpreyRcool Says:

    sent over from HT….

    Bank of America: Sandler O’Neill analyst, on CNBC, says he is no more concerned about rep and warranty exposure than he was before this news broke (12.01 -0.33)Notes that news was out last night in letter and it was unclear who was involved, but it was speculated that Countrywide was apart of it. Says suit appears to be more about Countrywide being slow to bring foreclosure as opposed to rep and warranty issues. Says this could for Countrywide or BAC to move more quickly through foreclosure process. Says not surprised to see mkt reacting this way, but he is no more concerned about rep and warranty exposures than he was before this news. Says he would be a buyer of BAC. This isn’t nearly as big an issue as bears are trying to paint it as.

  152. 152
    zman Says:

    HAL, WFT, other service also weak today on a draft law in Venezuela that would make it easier to nationalize equipment, easier to levy new tariffs, and harder for the companies to seek amends via arbitration.

  153. 153
    zman Says:

    “This isn’t nearly as big an issue as bears are trying to paint it as.” … as is so often the case.

  154. 154
    BirdsofpreyRcool Says:

    OT: put some money where my mouth is… bought some BAC trading shares. So, the whole mrkt probably blows up now! ha.

  155. 155
    zman Says:

    CNBC pointing out that BAC owns 1/3 of Blackrock. Hmmm. Time to get this day off the books. Or reverse it in the final hour.

  156. 156
    BirdsofpreyRcool Says:

    XACS#1 has this to say about #155..

    he thought everyone knew this last week when people wrote about the concept…said it wud be a breach of a mgr fiduciary duty to not try to get banks to buy back mtgs…this does NOT change his opiniona as he assumed this woudl happen…said it continues to be headline risk

  157. 157
    BirdsofpreyRcool Says:

    even little EGY is falling back into repeat-land.

  158. 158
    cargocult Says:

    MHR is the only green on my screen. What’s with them?

  159. 159
    zman Says:

    I would assume that the suit on BAC is just the opening salvo then in a whole list of putback suits.

  160. 160
    zman Says:

    Re MHR – See 116, also see Catalyst List.

  161. 161
    BirdsofpreyRcool Says:

    XACS#1 used to work at BAC… will ping him for an opinion.

  162. 162
    zman Says:

    Thanks, just wondering if BAC is a canary.

  163. 163
    BirdsofpreyRcool Says:

    #162 — it is for today.

  164. 164
    BirdsofpreyRcool Says:

    Feels like longs have packed up and left for the day… bears are roaming the field freely.

  165. 165
    BirdsofpreyRcool Says:

    HT — no glory in trying to catch a falling knife this late in the day. Longs left the room. Tomorrow is another day… they will take up the issue at that time.

  166. 166
    AAA Says:

    This kind of extreme adv/dec has generally marked short term bottoms, but I really don’t want to risk a repeat of this tomorrow. WLL and BEXP really taking the gas pipe.

  167. 167
    zman Says:

    AAA – yes, it is amazing how one group of guys who can’t seem to properly sign paper documents can bring down another group of guys who can drill down 2 miles through solid rock, make a left turn and drill over another 2 miles, set 30+ stages of explosives, and bring black liquids to the surface.

  168. 168
    zman Says:

    MMR and HAL holding levels from earlier, haven’t gotten a lot weaker. JB, when you get a chance could you have a look at those charts? Thanks.

  169. 169
    zman Says:

    WLL making a move to retake $100.

  170. 170
    BirdsofpreyRcool Says:

    The PIMCO, BlackRock, etc bond put-back requests have to do with not filing foreclosures FAST enough. On one hand, you have the Fed Govt telling BAC to “go slow, try to keep people in their houses.” On the other hand, you have bondholders doing what they have to do, to protect their own investors. BAC is in the middle of this.

    Once again, “good intentions” meets the Law of Unintended Consequences.

  171. 171
    Nicky Says:

    Afternoon all. sorry to check in so late but I have a sick dog.

    Anyway I am watching the close. Need to close above 1162.50 to keep alive higher highs before lower lows. Either way I am looking for weakness to be done by 25th October. If we close below the key level what we are likely looking at is an abc decline of which we have done a today and will see a b wave bounce tomorrow/Thursday and then down into Friday/Monday to complete the correction. Obvious support levels are 1150 and then 1131.

  172. 172
    zman Says:

    Sorry to hear that Nicky. Thanks for popping by. Much appreciate the levels.

  173. 173
    RMD Says:

    AREX: went to debutante party in NYC with ~45 other folks. (BTW 129: I blush).
    Co. went out of their way to provide as much data as they could as this is early days in their data collection. The industry wisdom is that the Wolfberry does not extend down into Crockett Cty. The slide show goes into the geology as to why the Co. thinks it does. It covers porosity, perm, etc, and their ests. of what thier rocks, and then wells, will look like; then they thoroughly cover the reasoning behind their estimates with logs, cores, etc. (They even cover why results to date are so-so (slide 32). They think geology is similar to Reagan Cty (slide 19 & 30).
    Quick thoughts:
    1.few know name, even analysts following it. Stumbles in past.
    2. stock cheap on proved reserves.
    3. co.s trying to be conservative, I think; they already hace a creditability issue (see 2).
    4. they will be doing verticals and horizontals, depending on which pays are present: Canyon and Ellenberger are vertical with comingled pays.
    5. Woldberry w/o Canyon is hz, and think zones are ~ Avalon, EFS (slide 40) yet stock unknown.
    6. F&D costs under $10 (slide 38) as go from historic 100m EUR wells to 204m (slide 35) to 354m (36-38).
    7. 93,000 Permian acres are contiguous so hz is efficient, and largely HBP so there is no rush.
    8. EOG is starting a 26 well hz program, has contracted rig, frac stages up to 21. Spent $5-6mm for 2 hz wells, with science project part estimated at $3-4mm of the $5-6mm. Keeping mum about 40-14 2H which rumored to IP at 550boe/d and doing 250/d now.
    9. EP blitzed last lease sale, buying 123,000 acres just under $1,500/acres to establish a new core area. AREX paid ~$155/acre in sale, embedded acre cost low.
    10. Street totally unaware production growth in ’11 will be ~40% (which is also implicit in co.s’numbers).
    11. financing. Co. says don’t have to be in development rush, use banks line until get data and then establish a development plan. I guess they have a further acq. to do of leases or ??, plus a deal would give Yorktown liquidity, so deal in 6 months anyway.
    12. co in NYC and Boston for a few days.
    13 full disclosure = I own lots.

  174. 174
    BirdsofpreyRcool Says:

    RMD — AREX has been berry berry good to you. Wish I had a seat on that train.

    Do you know how much they have drawn on their credit facility? And how much is available. Was talking to someone who thought it might be an issue… especially in this low nat gas price environment. Unless AREX has lots of above mrkt hedges…

  175. 175
    RMD Says:

    West: I read your Permian piece and wonder if you have thoughts about Crockett Cty or AREX.

  176. 176
    elijahwc Says:

    MHR: Hearing that two new acquisitions are in the hopper. One to close prior to year end.

  177. 177
    AAA Says:

    Z re 167, I’m just glad the guys who can’t keep papers straight aren’t doing the other stuff(except maybe at BP).

  178. 178
    RMD Says:

    174 you can continue credit line issues forward into year end reserve and PV-10 issues for gas as well.
    AREX slide 44 shows “liquidity” but I figure a bank would scream if you drew it all, so real availabity is some % of the stated $99mm, say a half? Also the slide supposed the facility increases from $115mm to $150mm.

  179. 179
    BirdsofpreyRcool Says:

    EXXI/MMR — Old Fart Industry Insiders are appalled… APPALLED at the treatment the buy-side, the sell-side, and the Street has shown MMR and EXXI. People who understand what is REALLY going on with MMR’s drilling program (especially DJ#2) have been combing the conf call transcripts, trying (in vain) to figure out what people heard to crash the stocks. Just b/c an analyst asks stupid questions and leaps to inane conclusions don’t mean we all have to jump off the bridge with him. Anyway, said it y’day, will say it again today, and probably tomorrow. Joe Allman gave us Christmas in October. DJ#2 is gonna be H-U-G-E. And that is only the start.

  180. 180
    RMD Says:

    179 BOP after traveling for 2 days without my PC, my gut feel is that the group , or lots of the group anyway, has run and is going to correct for a while.  Just musing, but selling some trading stock too in case I'm right.  (No, not AREX, that's investment stock.)

  181. 181
    BirdsofpreyRcool Says:

    RMD — trading and investing are two different strategies, for sure.  Sometimes they intersect and we get to add long-term investments at great trading prices.  But it doesn't always happen that way.  Funny how people will happily pay $19 for a stock one day, then run screaming from it at $16 two days later.  The Long-Term Outlook has not changed. 
    But I hear you.  NO ONE wants to (or likes to) lose money.  I think the risk in the EXXI/MMR opportunity is not buying in at all. 

  182. 182
    zman Says:

    KOG on the tape with a big acquisition (for them). Details in the post tomorrow. 

  183. 183
    Jerome Blank Says:

    #168 HAL…from a purely technical perspective, that gap lower on the daily chart on large vol is a concern for bulls, especially given what had otherwise been a relentless trend higher since the beginning of September, see the updated chart…additionally there is a bit of airspace under here, so it's tough to pin down nearby support, but most likely first major support is at $31.50 which puts HAL into a col of O's on the buy signal, major resistance now at the gap at $34.50-$35. HAL looked like it was stabilizing today, and held up fairly well… thinking a good day tommorrow could print  a closing white candle testing the downside gap which potentially sets up a nice morning star reversal pattern, and it should be noted that HAL still remains on a P&F buy signal in X's…additionally, the McClellan $NYMO closed at -28.17 and although not yet oversold is now below the recent Sept low…    

  184. 184
    milepost_43 Says:

    #168 thanks VOTED

  185. 185
    zman Says:

    Thanks JB, will vote later today.

    Wednesday post will be out a bit late as NFX reported a day earlier than I thought

  186. 186
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